Sept. 18, 2001
Contact: Lucas Hamilton
Morrison: What our nation's tragedy means to the insurance and securities markets
The events of Sept. 11, 2001, touched the lives of every American, raising awareness of the world we live in, and uniting our nation in strength and spirit.
The insurance and securities industries were among the hardest hit by last Tuesday's terrorist attack on the World Trade Center in New York City. Both industries suffered immense human and financial losses, but are taking steps this week to move forward and keep their businesses on track, said State Auditor John Morrison, Montana's Commissioner of Insurance and Securities.
Of the more than 40 securities firms located in the two World Trade Center towers, eight are registered to do business in Montana. Twenty-five of the more than 150 insurance-related companies and agencies in the World Trade Center are licensed in Montana. (Please see attached list of securities firms, and insurance companies and agencies licensed in Montana.)
Preliminary loss estimates from the insurance industry exceed $20 billion. Based on the wide variety of insurance claims likely to arise from this tragedy, it is difficult to say exactly what the final total will be, Morrison said.
Numerous types of claims are expected: property loss, business interruption, workers' compensation, health, life, auto and aviation.
Though the financial estimate of more than $20 billion is daunting, Morrison encourages folks to keep in mind that last year the insurance industry wrote more than $1 trillion in insurance premiums nationwide. A preliminary estimate of $20 billion represents 2 percent of the premiums written in 2000.
"The insurance industry is facing an astronomical financial price tag. But, these companies have assets behind the risk that they assume. It won't be a great day for the insurance industry when they pay these claims, but it will not break them," Morrison said.
Financially, this tragedy exceeds disasters of the past:
Most Expensive Natural Disasters in the United States:
Hurricane Andrew '92: $15.5 billion in insured losses
Northridge Earthquake '94: $15.3 billion in insured losses
Most Expensive Man Made Disasters in the United States:
Los Angeles Riots '92: $775 million
World Trade Center Bombing '93: $510 million
Oklahoma City '95: $125 million
"Insurance is the sale of a promise, and as regulators, my colleagues and I are here to make sure those promises are kept. It's our job to make certain insurance companies have the assets to cover these claims and that they pay the claims promptly, fairly and equitably," Morrison said.
And, as a safety net, when an insurer has financial difficulty, the state guaranty fund system is in place so that policyholders and claimants receive the benefits to which they are entitled.
"Montanans may wind up paying higher premiums if they are insured by a national company, but at this time the complete effects of this tragedy are not yet clear," Morrison said.
Just because a company has claims in New York does not mean there will be a direct effect on claims in Montana.
"Montana consumers should know we typically don't allow companies to base rate changes purely on national experience. Montana-specific experience is also a big factor," he said.
Morrison said he has been encouraged by the early reaction of the industry, with most companies willing to pay claims in full, regardless of whether policies contain act-of-war exclusions.
"A great majority of companies are stepping up to the plate and pledging to pay for covered losses caused by the attack," he said.
WTC Securities Firms Licensed in Montana (8)
Cantor Fitzgerald Securities
First Liberty Investment Group
Morgan Stanley/Dean Witter
Weatherly Securities Corp.
WTC Insurance Companies and Agencies Licensed in Montana (25)
Alexander & Alexander of New York American Alternative Insurance Corp.
American Express Travel Related Services Co. Aon Financial Services Group of New York
Aon Risk Services Inc. of New York Axcelera Specialty Risk
Chubb Indemnity Insurance Co. Dean Witter Reynolds Insurance Services
Frenkel & Co. General Security Indemnity Co.
General Security Insurance Co. Hudson Insurance Co.
Insurance Services Office Marsh U.S.A. Inc. New York
Minet Oppenheimer Life Agency
Partner Reinsurance Company of the U.S. Partnerre Insurance Company of New York
Rochdale Insurance Co. Scor Reinsurance Co.
Seabury & Smith Sorema North America Reinsurance Co.
Sumitomo Marine & Fire Insurance Co. Transcontinental Insurance Co.
Yasuda Fire & Marine Insurance Company of America
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